Nathan, Max; (2011) The economics of cultural diversity: lessons from British cities. Doctoral thesis (Ph.D), London School of Economics and Political Science.

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Abstract

This thesis examines the economic effects of cultural diversity; it focuses on recent experience in British cities, and on links between migrant and minority communities, diversity and innovation. Like many western societies Britain is becoming more culturally diverse, a largely urban process driven by net immigration and growing minority communities. Despite significant public interest we know little about the economic impacts. This PhD aims to fill these major gaps. First, I explore connections between diversity, immigration and urban outcomes. I ask: does diversity help or hinder urban economic performance? Initial cross-sectional analysis finds positive associations between ‘super-diversity’ and urban wages. Using panel data and instruments to establish causality, I find that net immigration helps raise native productivity, especially for high-skilled workers, but may help exclude lower-skill natives from employment opportunities. De-industrialisation and casualization of entrylevel occupations partly explain the employment results. Next I investigate links between co-ethnic groups, cultural diversity and innovation. I explore effects of co-ethnic and diverse inventor groups on individual members’ patenting rates, using patents microdata and a novel name classification system. Controlling for individuals’ human capital, I find small positive effects of South Asian and Southern European co-ethnic membership. Overall group diversity also helps raise individual inventors’ productivity. I find mixed evidence of effects on majority patenting. I then explore the case of London in detail, using a unique survey of the capital’s firms. I ask: does organisational diversity or migrant/ethnic ownership influence firms’ product and process innovation? Results show small positive effects of diverse managements on ideas generation. Diverse firms are more likely than homogenous firms to sell into London’s large, cosmopolitan home markets as well as into international markets. Migrant entrepreneurship helps explain the main result. Together, these papers make important contributions to a small but growing literature on diversity, innovation and economic development.

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